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Introduction
Incentive:
Incentive plans are part of an employee's compensation or pay. The incentive plan gives
an employee the opportunity to increase his annual pay based upon either company
performance or individual performance. Incentive plans are a way for companies to keep
employees motivated to perform to the best of their abilities, thus increasing company
profit.
Definition
An incentive is defined as something, such as a punishment or reward, that induces
action. Incentives are encountered every daywe hope to get a pay raise because of job
performance, or we stay within a posted speed limit because we are afraid of getting a
speeding ticket.
Incentives are now commonplace in engineering and construction projects. Efforts to
date, however, have focused primarily on incentives at the company level, e.g., an owner
provides a contractor with a monetary incentive for meeting a certain completion date.
Little documentation exists regarding the effects of applying incentives that are provided
directly to individuals or groups of individuals (project team, specific craft, discipline
group) based on results achieved on a project.
This toolkit focuses specifically on developing Employee Incentives Plans (EIPs) for
individuals or groups of individuals who are working on a specific engineering and/or
construction project. It does not address annual bonus plans or other similar performance
incentives; rather, its application is limited to developing an employee incentive plan for
a one-time project of defined scope and duration.
Employee incentives tied to safety performance have been used for many years, with
good success. Few companies, however, have tried linking employee incentives to other
Keep it simple
Avoid complicated schemes and long lists of goals. Select one goal, (or very few
very important goals) and put your focus there. Over time, you can update the
goals, or exchange some goals for other goals.
NEED OF EIP:
Employee Incentive Programs reward exceptional employees for
reaching work goals, achieving milestones or simply doing a good job. These types of
programs are designed to offer incentive and rewards to valued employees. Employee
Incentive Programs have proven very successful in arousing motivation in employees and
increasing the overall performance of the company. An incentive program is a great way
to show employees that you value their input while at the same time increasing your
businesses potential.
Here are the top ten reasons your company needs an Employee Incentive Program.
1 Mutual Rewards
An Employee Incentive Program is mutually beneficial. The employee feels valued and
motivated and is therefore more productive and committed. The company reaps the
benefits of a motivated, focused and loyal employee. The results of Incentive Programs
have a consistent theme. The companys bottom line increases as the employees
productivity peaks.
2 Increased motivation
Many people find it hard to motivate themselves at work. This is a common occurrence
and one that has been significantly effected by Incentive Programs. These programs
motivate employees by offering rewards for reaching targets and company goals. These
come in many forms ranging from cash to cars to holidays to gifts. The rewards are a
8 Reduced Absenteeism
The bottom line with incentive programs comes down to the very simple fact that people
like being rewarded for hard work and a job well done. The rewards are only part of the
equation. Incentive schemes show employees the company cares and appreciates the
work they are outputting. If an employee feels appreciated and has clear targets that result
in rewards then they are more likely to want to come to work.
9 Team Work
Incentive Programs promote teamwork and foster an environment that is conducive to
success. Employees working towards rewards or targets will pull together to achieve
desired results. Teamwork increases efficiency and creates harmony within the
workplace.
10 Decreased Turnover
Incentive Programs foster happy, productive working environments. Employees enjoying
this kind of environment will be more likely to stay long term. This means incentive
programs reduce the amount of turnovers within the company. The advantage of
consistent staffing is that you are not spending money on recruiting or training new staff.
You are also able to retain loyal committed employees with a vested company interest.
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Collaborative Efforts
When employees work together on team incentive plans, they establish a sense of
camaraderie, pulling together for the common good. This can strengthen bonds between
colleagues, managers and business owners. The advantage of a unified workforce is a
more efficient, pleasant work environment for all. It can also enhance regular work
relationships between departments and co-workers, resulting in increased productivity.
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DISADVANTAGE:
There was a time when employee incentive plans were associated only with sales-related
businesses. In current times, some people consider incentives to be important to boost
productivity for all types of business. However, the efficacy of these plans is uncertain,
sometimes due to the extra costs to the company and sometimes because of unanticipated
problems that arise. Designing suitable incentive plans and maintaining them consumes
both time and effort. Compensation expert Bruce R.Ellig suggests a diverse policy that
allows managers to use the advantages of a variety of plans while minimizing their
disadvantages.
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Note: If you run your own incentive program, and would simply like
discountedmerchandise fulfillments, please contact us for details.
also see: Employee Recognition awards
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Closely held companies with owners looking to sell some or all of their
stock: An ESOP is usually the best choice. In most cases, the ESOP will borrow
money to buy out the shares, but the company may just put in cash for several years in
a gradual sale. Companies can use pre-tax dollars to buy an owner outthere is no
other way to do this than an ESOP. If the company is a C corporation (rather than S),
the owner, if certain conditions are met, will be able to avoid paying any taxes on the
sale proceeds provided they are rolled over into stocks and bonds of U.S. operating
companies. Stock options would not work at all.
3.
Traditional closely held companies that will stay private but do not have a
selling owner: If your company is not going to experience a liquidity event (going
public or being acquired), then you have multiple choices. An ESOP provides by far
the most tax benefits to employees and the company, but it requires that allocations of
stock be made based on relative compensation or a more level formula, subject to
vesting and service requirements to enter the plan. Stock appreciation rights or
phantom stock are usually the best choice if you want to provide rewards to employees
based on merit or some other discretionary basis. With stock options or a stock
purchase plan, your company would have to create a market for the stock, which could
create costly and cumbersome securities law issues. Options or purchase plans are thus
generally used only as management compensation in such companies.
Public Companies
In some ways, public companies have more flexibility when choosing a stock plan, since
(1) there is a market for the stock, thus meaning the company doesn't have to buy it back
from employees; (2) there are no securities issues since the stock is already registered,
and (3) they typically have larger budgets than private companies, some of which, for
example, balk at paying the hefty sums associated with setting up an ESOP. Thus, the
selection process has less to do with eliminating the plans that simply won't work well
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WAY OF EIP:
Every company needs a strategic reward system for employees that addresses these four
areas: compensation, benefits, recognition and appreciation. The problem with reward
systems in many businesses today is twofold: They're missing one or more of these
elements (usually recognition and/or appreciation), and the elements that are addressed
aren't properly aligned with the company's other corporate strategies.
A winning system should recognize and reward two types of employee activityperformance and behavior. Performance is the easiest to address because of the direct link
between the initial goals you set for your employees and the final outcomes that result.
For example, you could implement an incentive plan or recognize your top salespeople
for attaining periodic goals.
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CONCLUSSION
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Incentive plans are part of an employee's compensation or pay. The incentive plan gives
an employee the opportunity to increase his annual pay based upon either company
performance or individual performance. Incentive plans are a way for companies to keep
employees motivated to perform to the best of their abilities, thus increasing company
profit.
This toolkit focuses specifically on developing Employee Incentives Plans (EIPs) for
individuals or groups of individuals who are working on a specific engineering and/or
construction project. It does not address annual bonus plans or other similar performance
incentives; rather, its application is limited to developing an employee incentive plan for
a one-time project of defined scope and duration.
Incentive plans were created for the express purpose of urging employees to motivate
themselves to higher achievement levels. Incentive plans that reward employees for
reaching pre-established goals provide encouragement and give staffers something to aim
for. The advantage to the employer is increased levels of productivity.
Employees who have the ability to positively impact their earning potential through
incentive plans are more likely to be loyal to the company they represent. This is
especially true if incentive plans have residual value. For example, if an insurance
company employee gets a bonus for signing up a new client, and then gets a residual
bonus for every subsequent year that client renews, earnings can increase over the life of
his employment. It becomes an advantage to the employee and employer for there to be
longevity in the professional relationship.
BIBLOGRAPHY
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BOOKS:
Ways to Screw Up Employee Incentives BY JEFF HADEN
Successful Employee Incentive Schemes- B.J Gudsuame
WEBSITE:
www.google.com
www.ask.com
www.hrleader.in
www.wikipidia.com
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